MONTANA

LIEN LAWS BY STATE

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MONTANA STATUTES

TITLE 71 MORTGAGES, PLEDGES, AND LIENS

CHAPTER 3 LIENS

PART 5 CONSTRUCTION LIENS

71-3-504 Renumbered 71-3-561

71-3-505 Renumbered 71-3-562

71-3-506 through 71-3-510 reserved

71-3-511 Repealed

71-3-512 Renumbered 71-3-533

71-3-513 Renumbered 71-3-534

71-3-514 Repealed

71-3-515 Renumbered 71-3-537

71-3-516 Renumbered 71-3-551

71-3-517 Renumbered 71-3-552

71-3-518 Renumbered 71-3-553

71-3-519 Renumbered 71-3-563

71-3-520 reserved

71-3-521 Scope

71-3-522 Definitions

71-3-523 Who May Claim a Construction Lien – Limitation

71-3-524 Limitation of Lien for Materials Supplied

71-3-525 Extent of Lien

71-3-526 Amount of Lien

71-3-527 through 71-3-530 reserved

71-3-531 Notice of Right to Claim Lien Required – Exceptions

71-3-532 Content of Notice of Right to Claim Lien

71-3-533 Notice of Completion

71-3-534 Filing With County Clerk – Notification of Owner

71-3-535 Attachment of Lien – Filing

71-3-536 Content of Lien Notice

71-3-537 Acknowledgment of Satisfaction of Lien – Penalty

71-3-538 through 71-3-540 reserved

71-3-541 Priority Amount Holders of Construction Liens

71-3-542 Priority of Construction Liens as Against Claims Other Than Construction Lien Claims

71-3-543 through 71-3-550 reserved

71-3-551 Substitution of Bond Allowed – Filing – Amount – Condition

71-3-552 Lien Discharged Upon Filing of Bond

71-3-553 Action Upon Bond – Period of Limitation Same

71-3-554 through 71-3-560 reserved

71-3-561 Parties

71-3-562 Limitation on Actions

71-3-563 Rules of Practice

MONTANA STATUTES

TITLE 71 MORTGAGES, PLEDGES, AND LIENS

CHAPTER 3 LIENS

PART 5 CONSTRUCTION LIENS

71-3-504 Renumbered 71-3-561 by Code Commissioner, 1987.

71-3-505 Renumbered 71-3-562 by Code Commissioner, 1987.

71-3-506 through 71-3-510 reserved.

71-3-511 Repealed. Sec. 17, Ch. 202, L. 1987.

71-3-512 Renumbered 71-3-533 by Code Commissioner, 1987.

71-3-513 Renumbered 71-3-534 by Code Commissioner, 1987.

71-3-514 Repealed. Sec. 17, Ch. 202, L. 1987.

71-3-515 Renumbered 71-3-537 by Code Commissioner, 1987.

71-3-516 Renumbered 71-3-551 by Code Commissioner, 1987.

71-3-517 Renumbered 71-3-552 by Code Commissioner, 1987.

71-3-518 Renumbered 71-3-553 by Code Commissioner, 1987.

71-3-519 Renumbered 71-3-563 by Code Commissioner, 1987.

71-3-520 reserved.

71-3-521 Scope

This part creates and provides for the attachment and enforceability of a construction lien against real estate in favor of a person furnishing services or materials under a real estate improvement contract. A nonconsensual lien against real estate for improvements made thereon may not arise except as provided in this part.

71-3-522 Definitions

(1) “Commencement of work” means the date of the first visible change in the physical condition of the real estate caused by the first person furnishing services or materials pursuant to a particular real estate improvement contract.

(2) “Construction lien” or “lien” means a lien against real estate arising under this part.

(3) (a) “Contracting owner” means a person who owns an interest in real estate and who, personally or through an agent, enters into an express or implied contract for the improvement of the real estate.

(b) For the purpose of determining whether a person is a contracting owner, agency is presumed, in the absence of clear and convincing evidence to the contrary:

(i) between employer and employee;

(ii) between spouses;

(iii) between joint tenants; and

(iv) among tenants in common.

(4) (a) “Contract price” means the amount agreed upon by the contracting parties for performing services and furnishing materials covered by the contract, increased or diminished by:

(i) the price of change orders or extras;

(ii) any amounts attributable to altered specifications; or

(iii) a breach of contract, including but not limited to defects in workmanship or materials.

(b) If no price is agreed upon by the contracting parties, the contract price means the reasonable value of all services or materials covered by the contract.

(5) (a) “Real estate improvement contract” means an agreement to perform services, including labor, or to furnish materials for the purpose of producing a change in the physical condition of the real estate, including:

(i) alteration of the surface by excavation, fill, change in grade, or change in a shore, bank, or flood plain of a stream, swamp, or body of water;

(ii) construction or installation on, above, or below the surface of land;

(iii) demolition, repair, remodeling, or removal of a structure previously constructed or installed;

(iv) seeding, sodding, or other landscape operation;

(v) surface or subsurface testing, boring, or analysis; and

(vi) preparation of plans, surveys, or architectural or engineering plans or drawings for any change in the physical condition of the real estate, regardless of whether they are used to produce a change in the physical condition of the real estate.

(b) For the purpose of claiming a construction lien, a real estate improvement contract does not include:

(i) a contract for the mining or removal of timber, minerals, gravel, soil, sod, or things growing on the land or a similar contract in which the activity is primarily for the purpose of making the materials available for sale or use; or

(ii) a contract for the planting, cultivation, or harvesting of crops or for the preparation of the soil for planting of crops.

71-3-523 Who May Claim a Construction Lien – Limitation

A person who furnishes services or materials pursuant to a real estate improvement contract may claim a construction lien, only to the extent provided in this part, to secure the payment of his contract price.

71-3-524 Limitation of Lien for Materials Supplied

(1) A lien for furnishing materials arises only if:

(a) (i) the materials are supplied with the intent that they be used in the course of construction of or incorporated into the improvement in connection with which the lien arises; and

(ii) the intent described in subsection (1)(a)(i) can be shown by a contract of sale, a delivery order, delivery to the site by the lien claimant or at his direction, or by other evidence; and

(b) the materials are:

(i) incorporated in the improvement or consumed as normal wastage in construction operations;

(ii) specifically fabricated for incorporation into the improvement and not readily resalable in the ordinary course of the fabricator’s business, even though the materials are not actually incorporated into the improvement;

(iii) used for the construction or operation of machinery or equipment used in the course of construction and not remaining in the improvement, subject to diminution by the salvage value of those materials; or

(iv) tools, appliances, or machinery used on the particular improvement. However, a lien for supplying tools, appliances, or machinery used on the improvement is limited as provided by subsection (3).

(2) The delivery of materials to the site of the improvement, whether by the lien claimant or by another, creates a presumption that they were used in the course of construction or were incorporated into the improvement.

(3) A lien arising for the supplying of tools, appliances, or machinery under subsection (1)(b)(iv) is limited as follows:

(a) if they are rented, the lien is for the reasonable rental value for the period of actual use, including any reasonable periods of nonuse provided for in the rental contract; and

(b) if they are purchased, the lien is for the price but arises only if they were purchased for use in the course of the particular improvement and have no substantial value after the completion of the improvement on which they were used.

71-3-525 Extent of Lien

(1) A construction lien extends to the interest of the contracting owner in the real estate, as the interest exists at the commencement of work or is thereafter acquired in the real estate, subject to the provisions of this section.

(2) (a) If an improvement is located wholly on one or more platted lots belonging to the contracting owner, the lien applies to the improvement and to the lots on which the improvement is located.

(b) If an improvement is not located wholly on one or more platted lots, the lien applies to the improvement and to the smallest identifiable tract or parcel of land on which the improvement is located.

(3) If the improvement is to leased premises, the lien attaches to the improvement and to the leasehold term. Except as provided in subsection (4), it does not attach to the lessor’s interest unless he contracted for or agreed to the improvement before it was begun.

(4) (a) A construction lien is not impaired to the extent of the value of the work or improvement that is severable from the real estate if the improvement is to premises held by:

(i) a contracting owner who owns less than a fee simple interest; or

(ii) a lessee and the lease is forfeited by the lessee.

(b) If the work or improvement may be removed without harm to the rest of the real estate, the lienholder may have the value determined, the work or improvement sold separately, and the proceeds delivered to him to satisfy the construction lien. The purchaser shall remove the work or improvement within 45 days of the sale.

(5) If a contracting owner contracts for improvements on real estate not owned by him as part of an improvement on his real estate or for the purpose of directly benefiting his real estate, there is a lien against the contracting owner’s real estate being improved or directly benefited in favor of persons furnishing services or materials to the same extent as if the improvement had been on the contracting owner’s real estate.

71-3-526 Amount of Lien

(1) A person who has furnished services or materials pursuant to a real estate improvement contract is entitled to a lien for the unpaid part of his contract price, subject to the provisions of 71-3-524 .

(2) A person’s lien is reduced by the sum of the liens of persons claiming construction liens through him.

71-3-527 through 71-3-530 reserved.

71-3-531 Notice of Right to Claim Lien Required – Exceptions

(1) The following are not required to give notice of a right to claim a lien as required by this section:

(a) a person who furnishes services or materials directly to the owner at his request;

(b) a wage earner or laborer who performs personal labor services for a person furnishing any service or material pursuant to a real estate improvement contract;

(c) a person who furnishes services or materials pursuant to a real estate improvement contract that relates to a dwelling for five or more families; and

(d) a person who furnishes services or materials pursuant to a real estate improvement contract that relates to an improvement that is partly or wholly commercial in character.

(2) A person who may claim a construction lien pursuant to this part shall give notice of his right to claim a lien to the contracting owner in order to claim a lien.

(3) Except as provided in subsection (4), this notice must be given no later than 20 days after the date on which the services or materials are first furnished to the contracting owner. If notice is not given within this period, a lien is enforceable only for the services or materials furnished within the 20-day period before the date on which notice is given.

(4) When payment for services or materials furnished pursuant to a real estate improvement contract, excluding a contract on an owner-occupied residence, is made by or on behalf of the contracting party from funds provided by a regulated lender and secured by an interest, lien, mortgage, or encumbrance for the purpose of paying the particular real estate improvement being liened, the notice required by this section must be given no later than 45 days after the date on which the services or materials are first furnished to the contracting owner. If notice is not given within this period, a lien is enforceable only for the services or materials furnished within the 45-day period before the date on which notice is given.

(5) The notice of the right to claim a lien must be sent to the contracting owner by certified mail or delivered personally to him. Notice by certified mail is effective on the date the notice is mailed. If the notice is delivered, written acknowledgement of receipt must be obtained from the owner. A person may not claim a construction lien unless he has complied with this subsection.

(6) (a) A person who may claim a lien shall also file with the clerk and recorder of the county in which the improved real estate is located a copy of the notice of the right to claim a lien, in the form required by 71-3-532. This copy must be filed no later than 5 business days after the date on which the notice of the right to claim a lien is given to the contracting owner.

(b) The notice filed with the clerk and recorder for the purpose of public notice is effective for 1 year from the date of filing. The notice lapses upon the expiration of the 1-year period unless the person who may claim a lien files with the clerk and recorder a 1-year continuation of the notice prior to the date on which the notice lapses. The clerk and recorder may remove the notice from the public record when it lapses.

(c) The continuation statement must include:

(i) the clerk and recorder’s file number of the notice;

(ii) the date on which the notice originally was filed; and

(iii) the name of the person to whom the original notice was given.

(d) If a notice of a right to claim a lien is required under this section, a person may not claim a construction lien pursuant to this part unless there is an unexpired notice of right to claim a construction lien or an unexpired continuation notice filed with the clerk and recorder at the time he files his lien.

(7) At the request of any subcontractor or material supplier who may claim a lien through him, a person shall furnish to the requestor within 5 business days:

(a) a description sufficient to identify the real estate being improved; and

(b) the name and address of the contracting owner.

71-3-532 Content of Notice of Right to Claim Lien

(1) The notice of the right to claim a lien must be in writing and state that it is a notice of a right to claim a lien against real estate for services or materials furnished in connection with improvement of the real estate.

(2) The notice must contain a description sufficient to identify the real estate against which the lien may be claimed.

(3) The notice must contain the following information and be in substantially the following form:

NOTICE OF THE RIGHT TO CLAIM A LIEN

WARNING: READ THIS NOTICE. PROTECT YOURSELF FROM PAYING ANY CONTRACTOR OR SUPPLIER TWICE FOR THE SAME SERVICE.

To: ____________ Date of mailing: __________

(Owner)_______________________________________

(Owner’s address)

This is to inform you that ____________ has begun to provide _____________ (description of services or materials) ordered by _________________ for improvements to property you own. The property is located at __________________________ A lien may be claimed for all services and materials furnished to you if this notice is given to you within 20 days after the date on which the services or materials described are first furnished to you. If the notice is not given within that time, a lien is enforceable for only the services or materials furnished within the 20-day period before the date on which the notice is given. However, if a regulated lender has provided the funds for the services or materials described in this notice, the notice may be given 45 days after the date the services or materials are first furnished to you. If the notice is not given within that time, a lien is enforceable for only the services or materials furnished within the 45-day period before the date the notice is given.

Even if you or your mortgage lender have made full payment to the contractor who ordered these services or materials, your property may still be subject to a lien unless the subcontractor or material supplier providing this notice is paid. THIS IS NOT A LIEN. It is a notice sent to you for your protection in compliance with the construction lien laws of the state of Montana.

This notice has been sent to you by:

NAME: ___________________________

ADDRESS: ________________________

TELEPHONE: ______________________

IF YOU HAVE ANY QUESTIONS ABOUT THIS NOTICE, PLEASE CALL US IMPORTANT INFORMATION ON REVERSE SIDE

IMPORTANT INFORMATION FOR YOUR PROTECTION

Under Montana’s laws, those who work on your property or provide materials and are not paid have a right to enforce their claim for payment against your property. This claim is known as a construction lien. If your contractor fails to pay subcontractors or material suppliers or neglects to make other legally required payments, the people who are owed money may look to your property for payment, even if you have paid your contractor in full. The law states that all people hired by a contractor to provide you with services or materials are required to give you a notice of the right to claim a lien to let you know what they have provided.

WAYS TO PROTECT YOURSELF ARE:

– RECOGNIZE that this notice of delivery of services or materials may result in a lien against your property unless all those supplying a notice of the right to lien have been paid.

– LEARN more about the construction lien laws and the meaning of this notice by contacting an attorney or the firm sending this notice.

– WHEN PAYING your contractor for services or materials, you may make checks payable jointly to the contractor and the firm furnishing services or materials for which you have received a notice of the right to claim a lien.

– OBTAIN EVIDENCE that all firms from whom you have received a notice of the right to claim a lien have been paid or have waived the right to claim a lien against your property.

– CONSULT an attorney, a professional escrow company, or your mortgage lender.

71-3-533 Notice of Completion

(1) The contracting owner may file a notice of completion at any time after the completion of any work or improvement.

(2) The following acts or events constitute completion of any work or improvement for the purpose of filing a notice of completion:

(a) the written acceptance by the contracting owner, his agent, or representative of the building, improvement, or structure. The filing of a notice of completion shall not be considered as an acceptance of the building, improvement, or other structure.

(b) the cessation from labor for 30 days upon any building, improvement, or structure, or the alteration, addition to, or repair thereof.

(3) The notice of completion together with an affidavit of publication as hereinafter required shall be filed in the office of the county clerk and recorder of the county where the property is situated and the notice shall set forth:

(a) the date when the work or improvement was completed or the date on which cessation from labor occurred first and the period of its duration;

(b) the contracting owner’s name and address and the nature of the title, if any, of the person signing the notice;

(c) a description of the property sufficient for identification;

(d) the name of the contractor, if any.

(4) The notice shall be verified by the contracting owner or his agent.

(5) A copy of the notice of completion shall be published once each week for 3 successive weeks in a newspaper of general circulation in the county where the land on which the work or improvement was performed is situated.

(6) The contracting owner shall give a copy of the notice of completion to any person who has given the contracting owner a notice of a right to claim a lien.

71-3-534 Filing With County Clerk – Notification of Owner

(1) The county clerk must endorse upon every lien the day of its filing and make an abstract thereof in a book by him to be kept for that purpose and properly indexed, containing the date of the filing, the name of the person holding the lien, the amount thereof, the name of the person against whose property the lien is filed, and the description of the property to be charged with same.

(2) The clerk shall not file the lien unless there is attached thereto a certification by the lien claimant or his agent that a copy of the lien has been served upon each owner of record of the property named in the lien. Service shall be made by personal service on each owner or by mailing a copy of the lien by certified or registered mail with return receipt requested to each owner’s last known address. The certification shall state whether service was made by delivery of certified or registered mail.

71-3-535 Attachment of Lien – Filing

(1) A person’s lien does not attach and may not be enforced unless, after entering into the contract under which the lien arises, he has filed a lien not later than 90 days after:

(a) his final furnishing of services or materials; or

(b) the owner files a notice of completion pursuant to 71-3-533.

(2) (a) The lien must be filed with the county clerk and recorder of the county in which the improved real estate is located.

(b) The person claiming the lien must certify to the county clerk and recorder that a copy of the lien has been served on the owner of record as provided in 71-3-534 (2).

(3) The lien statement must contain:

(a) the name and address of the person claiming the lien;

(b) a description of the real property against which the lien is claimed sufficient to identify it;

(c) the name of the contracting owner;

(d) the name and address of the party with whom the person claiming the lien contracted to furnish services or materials;

(e) a description of the services or materials provided;

(f) the amount unpaid for services or materials or, if no amount is fixed by the contract, a good faith estimate of the amount unpaid, designated as an estimate;

(g) (i) the date on which the services or materials were first furnished; and

(ii) the date on which the services or materials were last furnished; and

(h) a declaration that a notice of a right to claim a lien was given to the contracting owner or an explanation of why such notice was not required.

(4) A lien notice that is filed pursuant to this section before the person claiming the lien has substantially furnished services or materials pursuant to a real estate improvement contract is not effective to create a construction lien unless the lien claimant is prevented from fulfilling his obligation because of the fault of another person.

(5) Except as provided in subsection (6), a lien attaches at the commencement of work as defined in 71-3-522 .

(6) A lien attaches when it is filed if it is for the preparation of plans, surveys, or architectural or engineering plans or drawings for any change in the physical condition of land or structures that are not used incident to producing a change in the physical condition of the real estate.

71-3-536 Content of Lien Notice

The notice for the lien provided for in 71-3-535 may be filed in substantially this form:

Construction Lien

I, ____________________ (insert name and address of person claiming the construction lien), claim a construction lien pursuant to Title 71, chapter 3, of the Montana Code Annotated. I claim this lien against ___________ (give description of the real property against which the lien is claimed sufficient to identify it). The contracting owner is __________________ (insert name of the person who owns the real estate and name of the person who entered into the contract to improve it). At the request of _____________ (give name and address of party with whom person claiming the lien contracted to furnish services or materials), I provided the following: _______________ (give description of the services or materials provided). The amount remaining unpaid is ___________ (insert the amount unpaid; if no amount was fixed by the contract, give your good faith estimate of the amount and identify it as an estimate). I first furnished these services or materials on ____________ (give date) and last furnished services or materials on ___________ (give date; if the date has not yet arrived, insert an estimate of the date on which services or materials will be last furnished and identify the date as an estimate). I gave notice of the right to claim a lien as required by 71-3-531 on _______ (give date) to ___________ (give name of contracting owner). ______________ (If it is not required to give a notice of the right to claim a lien, state the reason it is not required.)

71-3-537 Acknowledgment of Satisfaction of Lien – Penalty

Whenever any indebtedness which is a lien upon any such real estate, structure, building, or other improvement is paid and satisfied, it is the duty of the creditors to acknowledge satisfaction thereof as in case of a mortgage; and if any creditor fails to acknowledge satisfaction, as aforesaid, he is liable to any person injured by such failure to the amount of such injury and the costs of action.

71-3-538 through 71-3-540 reserved.

71-3-541 Priority Among Holders of Construction Liens

(1) There is equal priority between or among construction lien claimants who contribute to the same real estate improvement project, regardless of the date on which each lien claimant first contributed services or materials and regardless of the date on which he filed his notice of lien. When the proceeds of a foreclosure sale are not sufficient to pay all construction lien claimants in full, each claimant will receive a pro rata share of the proceeds based on the amount of his respective lien.

(2) Construction liens attaching at different times have priority in the order of attachment.

71-3-542 Priority of Construction Liens as Against Claims Other Than Construction Lien Claims

(1) A construction lien arising under this part has priority over any other interest, lien, mortgage, or encumbrance that may attach to the building, structure, or improvement or on the real property on which the building, structure, or improvement is located and which is filed after the construction lien attaches.

(2) An interest, lien, mortgage, or encumbrance that is filed before the construction lien attaches has priority over a construction lien arising under this part, except as provided in subsections (3) and (4).

(3) A construction lien has priority, to the extent of the value of the work or improvement that is severable, over an interest, lien, mortgage, or encumbrance that is filed before the construction lien attaches. If the work or improvement may be removed without harm to the rest of the real property, the lienholder may have the value determined, the work or improvement sold separately on foreclosure, and the proceeds delivered to him to satisfy the construction lien.

(4) A construction lien has priority over any interest, lien, mortgage, or encumbrance that is filed before the construction lien attaches if that interest, lien, mortgage, or encumbrance was taken to secure advances made for the purpose of paying for the particular real estate improvement being liened.

71-3-543 through 71-3-550 reserved.

71-3-551 Substitution of Bond Allowed – Filing – Amount – Condition

(1) Whenever a construction lien has been filed upon real property or any improvements thereon, the contracting owner of any interest in such property, whether legal or beneficial, may, at any time before the lien claimant has commenced an action to foreclose such lien, file a bond with the clerk of the district court in the county in which such property is situated or, if such property is situated in more than one county, with the clerk of the district court of any county in which a part of such property is situated.

(2) Such bond shall be in an amount 1 1/2 times the amount of the lien and shall be either in cash or written by a corporate surety company. If written by a corporate surety, such bond shall be approved by a judge of the district court with which such bond is filed.

(3) The bond shall be conditioned that if the lien claimant shall be finally adjudged to be entitled to recover upon the claim upon which his lien is based, the principal or his sureties shall pay to such claimant the amount of his judgment, together with any interest, costs, attorneys’ fees, and other sums which such claimant would be entitled to recover upon the foreclosure of a lien against the principal.

71-3-552 Lien Discharged Upon Filing of Bond

Upon the filing of a bond as provided in 71-3-551, the lien against the real property shall forthwith be discharged and released in full and the bond shall be substituted for such lien.

71-3-553 Action Upon Bond – Period of Limitation Same

(1) When a bond is filed as provided in 71-3-551, the person filing such lien may bring an action upon the bond.

(2) Such action shall be commenced within the time allowed for the commencement of an action upon foreclosure of a lien, and the statute of limitations applicable to a lien foreclosure shall apply to an action upon such bond as it would had no bond been filed.

71-3-554 through 71-3-560 reserved.

71-3-561 Parties

All persons interested in the matter in controversy or in property charged with the lien or having liens thereon may be made parties.

71-3-562 Limitation on Actions

All actions under this part must be commenced within 2 years from the date of the filing of the lien.

71-3-563 Rules of Practice

(1) Except as otherwise provided in this part, the provisions of Title 25 are applicable to and constitute the rules of practice in the proceedings mentioned in this part.

(2) The provisions of Title 25 relative to new trials and appeals, except insofar as they are inconsistent with the provisions of this part, apply to the proceedings mentioned in this part.